One battle after another....

One battle after another….

How I hear you ask, does a war in the middle east, drain all the positivity and life out of the

UK property market?

In the wise words of BBT (Billy Bob Thornton) in Landman;

“We have a 120 petroleum based infrastructure, our whole lives depend on it”

It’s used to transport all of our goods, shipping, planes, automobiles. It gives us our energy

and power.

It’s in plastics, paint, roads, clothing… almost everything in one form or another

So, when oil prices go up over 50% in a month

Prices of most other things go up

(enter slowly from left) and inflation comes into the picture

We saw this in 2022 with the Russia / Ukraine war

Energy prices went up, inflation peaked out at 11% and interest rates at 5.25%

Why?

Interest rates are the bank of England's main weapon in the war on inflation

Increase interest rates, and you get a higher return from more money in the bank = more

people saving = less money in circulation = downward pressure on prices / inflation

Also

Increase interest rates, and most peoples largest expense (their mortgage) goes up = less

cash in your pocket to spend each month = less money in circulation = downward pressure

on prices / inflation

This is why many experts, including analysts at the Financial Times, now expect interest

rates to be held at 3.75% next week, and for the rest of the year, if not increasing

Should we panic and put our property plans on hold?

Below is a table that shows real return on property and leveraged return (i.e. if using a

mortgage) at 5 year intervals from 2006

Before looking at that, let’s look at some of the events that took place in each year

Events that caused people to pause their property plans

2006 - North Korean first nuclear test, twitter launched, Saddam Hussein executed, the

start of the housing crisis that led to the global financial crisis

2011 - still in the aftermath of the GFC, arab spring, death of Osama Bin LAden, occupy

Wall Street

2016 - Brexit vote, presidential election / Donald Trump, panama papers

2021 - Covid 19, Taliban take over Afghanistan, Suez canal blockage, capital riots

2026 - America, Israel, Iran war…. So far….

What happened to property? See below. It. Kept. Going. Up.

Don’t be distracted, keep your plans in focus, keep building and buying

Thanks,

Callum